European Study Finds Megaupload Closure Helped Blockbusters, Hurt Smaller Pics

Researchers from the Munich School of Management and the Copenhagen Business School have published a paper examining the effects on box office revenues of the shutdown of Megaupload. The notorious cyberlocker was closed on January 19, 2012 and the result, the study concludes, is that the move may have actually dented the theatrical performance of some films. The research team used weekly data from 10,272 movies in 50 countries over the period 2007-2013 and found that the box office for a majority of movies didn’t increase, while the effect on a mid-range of pics was negative. Only blockbuster titles benefited from the absence of Megaupload, among them: Harry Potter And The Half-Blood Prince, Ice Age: Dawn Of The Dinosaurs, The Avengers, and The Hobbit: An Unexpected Journey, in countries like Australia, Denmark, Italy, Israel, the Netherlands and the United Arab Emirates. The researchers argue that “smaller films” were impacted negatively because of “social network effects” whereby online piracy “acts as a mechanism to spread information about a good from consumers with low willingness to pay to consumers with high willingness to pay.” Word-of-mouth promotion, in other words, decreases when pirates aren’t there to share buzz. Without naming them, the researchers suggest these smaller films were affected negatively because they usually have limited marketing campaigns making word-of-mouth “a more important success driver.” If some of the word-of-mouth effect is removed with the shutdown of illegal content, “performance of smaller movies is likely to be hit harder.” They allowed, however, that an alternative explanation for the varied impact of the Megaupload shuttering could be that it “coincided with a general downward trend in online piracy due to the emergence of convenient legal digital movie download/streaming services such as iTunes or Netflix.” A study last March by a pair of U.S. researchers said that in the 18 weeks following the Megaupload closure, there was a 6%-10% increase in digital movie revenues across 12 countries. The academics used data from two anonymous Hollywood majors with the findings based on online rentals and purchases in the U.S., the UK, Australia, New Zealand, Belgium, France, Germany, Spain, Mexico, Austria, Ireland and Canada.